Shakeout
The life-cycle phase in which capacity overtakes slowing demand, prices fall and weaker firms exit. Often the result of capacity built on growth forecasts extrapolated too far.
Where you will meet it
Shakeout appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Explain the industry life cycle and what follows from each stage
“Industries pass through embryonic, growth, shakeout, mature and declining phases.”
- Assess trends in how large an industry is, its growth, its profitability and the market shares within it
“Growth separates volume from price and cyclical from structural change, and an industry's stage in its life cycle (embryonic, growth, shakeout, mature or declining) shapes both growth and competition.”
Practise it
Practise shakeout until it is automatic: questions that explain every wrong option.
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